Monday, January 12, 2009

Today's National Law Journal has this report on a new Seventh Circuit decision, Katz v. Gerardi, ___ F.3d ___ (7th Cir. Jan. 5, 2009), which addresses whether CAFA applies to certain securities class actions and creates a split in authority with the Ninth Circuit.

In July, the Ninth Circuit held that CAFA's "general grant of the right of removal of high-dollar class actions does not trump" section 22(a) of the Securities Act of 1933 (15 U.S.C. section 77v(a)), which contains a "specific bar to removal of cases [filed in state court and] arising under the ... Act." Luther v. Countrywide Home Loan Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008).

Now, the Seventh Circuit has held that "[c]laims listed in [28 U.S.C.] §1453(d) are not removable. Other securities class actions are removable if they meet the requirements of the 2005 Act (100 investors, $5 million in controversy, minimal diversity). To read §22(a) as Katz [and the Ninth Circuit] does would be to make most of §1453(d) pointless." Katz, slip op. at 7. Chief Judge Easterbrook had this to say about the Ninth Circuit's opinion in Luther:

Luther failed to recognize that §22(a) of the 1933 Act is not a subset of the 2005 Act. More importantly, Luther did not appear to understand that §1453(d) tells us how the 2005 Act affects securities cases: the ninth circuit did not analyze this language or even acknowledge its existence. We therefore disagree with Luther and hold that securities class actions covered by the 2005 Act are removable, subject to the exceptions in §1332(d)(9) and §1453(d). Because it creates a conflict among the circuits, this opinion was circulated before release to all judges in active service. See Circuit Rule 40(e). None of the judges favored a hearing en banc.